Below is an email I had to write to another Realtor. Unbelievably, the government hasn’t approved extending the forgivable debt of a loss in a real estate transaction. This jeopardizes all short sales going forward. With a 2-3 year supply of short sales, this needs to be addressed.
I found out yesterday that the bank will not give a written approval before the end of the year. They are doing this on all transactions. I assume it’s a year-end tax issue but really don’t know since we did get a verbal.
The Sellers can’t commit that they will sign off, because as of 1/1/13 their forgiven debt will now be treated as taxable income. It’s only logical that this piece of legislation, which has been in effect since 2007, will get extended once the fiscal cliff negotiations get finalized. There are too many short sales out there for this not to occur. However, it isn’t now and it’s not something they wish to risk.